In April, 34 percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down 6 points from March. The last time job openings were below 34 percent (seasonally adjusted) was in January 2021 (Covid recession). Twenty-nine percent had openings for skilled workers (down 4 points) and 13 percent had openings for unskilled labor (unchanged for the third consecutive month). The difficulty in filling open positions is particularly acute in the construction, transportation, and manufacturing industries. Openings were the lowest in the finance and agriculture industries. Job openings in construction were up 1 point from last month and up 2 points from April 2024. Also notable, job openings in the wholesale industry rose 16 points from the prior month to 36 percent. A seasonally adjusted net 13 percent of owners plan to create new jobs in the next three months, up 1 point from March. Overall, 56 percent reported hiring or trying to hire in April, up 3 points from March. Forty-seven percent (85 percent of those hiring or trying to hire) of owners reported few or no qualified applicants for the positions they were trying to fill (unchanged). Twenty-eight percent of owners reported few qualified applicants for their open positions (up 2 points) and 19 percent reported none (down 2 points). The percent of small business owners reporting labor quality as the single most important problem for their business was unchanged from March for the third consecutive month at 19 percent, remaining the top issue, with taxes 3 points behind. This is also the third consecutive month that labor quality was ranked the top problem. Labor costs reported as the single most important problem for business owners fell 3 points from March to 8 percent.

Fifty-eight percent reported capital outlays in the last six months, down 1 point from March and the first decline since September of last year. Of those making expenditures, 40 percent reported spending on new equipment (down 3 points), 25 percent acquired vehicles (down 2 points), and 16 percent improved or expanded facilities (unchanged). Fourteen percent spent money on new fixtures and furniture (up 1 point), and 6 percent acquired new buildings or land for expansion (up 1 point). Eighteen percent (seasonally adjusted) plan capital outlays in the next six months, down 3 points from March. The last time the percent of firms planning capital outlays was this low was in April 2020, during the beginning of the Covid pandemic.

The net percent of owners raising average selling prices fell 1 point from March to a net 25 percent seasonally adjusted. Fourteen percent of owners reported that inflation was their single most important problem in operating their business (higher input costs), down 2 points from March and the lowest reading since September 2021. Unadjusted, 11 percent (up 1 point) reported lower average selling prices and 39 percent (up 1 point) reported higher average prices. Price hikes were most frequent in the wholesale (58 percent higher, 12 percent lower), construction (49 percent higher, 6 percent lower), retail (47 percent higher, 7 percent lower), and services (40 percent higher, 4 percent lower) industries. Seasonally adjusted, a net 28 percent plan price hikes in April, down 2 points from March. Demand is still too strong to trigger widespread price reductions, but the economy is showing some signs of slowing.

A net 5 percent reported their last loan was harder to get than in previous attempts, down 1 point from March. Three percent reported that financing and interest rates were their top business problem in April, unchanged for the fourth consecutive month. A net 6 percent of owners reported paying a higher rate on their most recent loan, up 2 points from March. The average rate paid on short maturity loans was 8.9 percent, unchanged from March. Twenty-six percent of all owners reported borrowing on a regular basis, down 2 points from March. High mortgage rates have slowed housing activity, a damper on GDP growth. But loan availability is good.

Seasonally adjusted, a net 33 percent reported raising compensation, down 5 points from March. A seasonally adjusted net 17 percent plan to raise compensation in the next three months, down 2 points from March. The last time plans to raise compensation was this low was in March 2021. This is good news from the inflation fighting perspective as labor costs are the most significant operating cost for most small firms. The frequency of reports of positive profit trends was a net negative 21 percent (seasonally adjusted), 7 points better than in March. This was the highest reading since March 2023. Among owners reporting lower profits, 38 percent blamed weaker sales, 14 percent cited usual seasonal change, 11 percent cited the rise in the cost of materials, 9 percent cited the price change from their product or service, and 8 percent cited labor costs. Among owners reporting higher profits, 51 percent cited sales volume, 17 percent cited usual seasonal change, and 10 percent cited higher selling prices.

A net negative 8 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, up 3 points from March. The last time actual sales changes were this high was in September 2023. However, reports of sales gains are still in recession territory. The net percent of owners expecting higher real sales volumes fell 4 points from March to a net negative 1 percent (seasonally adjusted). This is the fourth consecutive month real sales expectations declined after surging from recession levels after the election. The net percent of owners reporting inventory gains fell 2 points from March to a net negative 5 percent (seasonally adjusted). Not seasonally adjusted, 13 percent reported increases in stocks (unchanged) and 17 percent reported reductions (down 2 points). A net negative 6 percent (seasonally adjusted) of owners viewed current inventory stocks as “too low” in April, up 1 point from March. With more owners viewing stocks as excessive than too low, inventory accumulation will be weak unless there is a major reduction in consumer spending, leaving more stuff on the shelves. A net negative 4 percent (seasonally adjusted) of owners plan inventory investment in the coming months, down 3 points from March and the lowest in eleven months. Prospects for sales growth don’t support inventory investment.

Very few small businesses export their goods and services, but millions acquire imported goods as inputs to their operations and those supply chains are currently at risk. Tarriff policy is suddenly and dramatically changing relative prices (costs), and relative prices drive all decisions. Uncertainly remains elevated and thus caution clouds spending, hiring, and investing decisions. Currently, the Uncertainty Index stands at 92, the 51-year average is 68. The average since 2016 is 80.

While the quality of the available labor force remains the top problem, taxes are close behind, and for over 51 years have received the most votes for single most important business problem. Renewal of the Tax Cuts and Jobs Act (TCJA) remains a major source of uncertainty. Nearly 1 in 10 owners view government regulations and red tape as their top business problem, a form of taxation in which the government directs the expenditure of resources for compliance.

Inflation continues to fade in the list of concerns (now ranking third). Actual inflation is low, although not quite at the Fed’s goal of 2 percent. But prices are still rising, and what owners want to see is a reversal of the cumulative 20 percent increase in prices under the Biden administration. History tells us that this has always required a slowdown in the economy. Massive improvements in productivity, which reduce production costs (especially in services), can trigger lower selling prices. This is a far more attractive path to achieving their goal. However, this will require substantial investment. Capital spending has been anemic since 2020, and capital spending plans are at the lowest level seen since 2020.

Overall, the economy is not in bad shape for now, time will tell what happens next. President Trump wants the Fed to cut its policy rate. But that won’t do much for the real economy, it will just make a lot of noise in the financial markets. Access to credit is not a problem for most small businesses. For the next few months, owners will be watching the news to monitor progress toward passage of “one big beautiful bill.”